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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: Shri Joginder Singh, & Shri Ashwani Taneja
21/06/2016 सुनवाई क" तार"ख / Date of Hearing : 29/06/2016 आदेश क" तार"ख /Date of Order: आदेश / O R D E R Per Ashwani Taneja (Accountant Member): This appeal has been filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals), Mumbai- 35 {(in short ‘CIT(A)’}, dated 17.12.2013 passed against penalty 2 Dhananjay M. Pandey
order u/s 271(1)(c) dated 29.03.2011 for the Assessment Year 2007-08. 2. During the course of hearing, arguments were made by Shri Darshan Gandhi, Authorised Representative (AR) on behalf of the Assessee and by Shri Rakesh Ranjan, Departmental Representative (DR) on behalf of the Revenue.
The solitary issue raised in this appeal by the assessee is with regard to levy of penalty of Rs.8,09,300/- on the disallowance made by the AO u/s 40(a)(ia).
3.1. During the course of hearing, Ld. Counsel has made detailed arguments and supported them with various judgments in support of his claim that no penalty u/s 271(1)(c) can be levied with respect to disallowance made u/s 40(a)(ia).
3.2. Per contra, Ld. DR supported the orders of the lower authorities.
3.3. We have gone through the orders of the lower authorities as well as judgment placed before us by the Ld. Counsel on this issue. It is noted that disallowance was made u/s 40(a)(ia) for an aggregate amount of Rs.8,09,300/- on account of following payments: a. Sub-contract charges Rs.5,79,300/- b. Legal fees Rs.50,000/- c. Accounting/professional charges Rs.30,000/- 3 Dhananjay M. Pandey d. Architect fees Rs.1,50,000/- Total Rs.8,09,300/- With the assistance of Ld. Counsel, it is noted by us that genuineness of this expenses has never been doubted by the lower authorities at any stage. Further, these expenses were duly substantiated by filing requisite evidences. No adverse observations have been made by the AO in this regard. Thus, genuineness of all these expenses is not doubted and these expenses were duly substantiated. The only ground to make disallowance was on account of non-deduction of tax at source u/s 194C by invoking deeming provisions of section 40(a)(ia). Under these circumstances, the issue arises whether it is a case of concealmentof income or furnishing of inaccurate particulars of income.
3.4. We have considered the facts of this case and judgment relied upon by the Ld. Counsel. It is noted from the perusal of the penalty order that no case of concealment of furnishing of inaccurate particulars of income has been made by the AO while levying the penalty. It has been stated by the Ld. AO while levying the penalty that since disallowance has been made u/s 40(a)(ia), therefore, there arose a presumption of concealment of income. We do not agree with the approach of the AO. The disallowance of an expenses because of application of deeming provisions of section 40(a)(ia) cannot straightaway give rise to a presumption of concealment of income, especially, when the expenses have been found to be otherwise genuine and duly substantiated. In the case of CIT 4 Dhananjay M. Pandey vs. Dahyabhai Veljibhai Patel, by the Hon’ble Gujrat High Court vide its order dated 06.01.2014 in Tax Appeal No.798 of 2013 held as under: “Having heard learned counsel for the appellant and having perused the judgment under challenge, we see no scope for interference. The Tribunal applied the decision of the apex Court in case of Reliance Petroproducts Private Limited, reported in 322 ITR 158 (SC) and observed that merely on account of disallowance of certain claim, penalty cannot be imposed. The Tribunal also recorded that the question of disallowance under section 40[a](ia) of the Act in respect of transporters had given rise to diversified opinion. CIT [A] has further recorded that the department did not question genuineness of the expenditure but disallowed the same merely on the ground that TDS was not deducted. Such being the factual position, no question of law arises. Tax Appeal is, therefore, dismissed.”
3.5. Similar view has been taken by the Hon’ble Gujarat High Court in a recent judgment in the case of Nayan C. Shah v. Income Tax Officer 69 taxmann.com 256 (Guj) vide order dated 29th March 2016 wherein it was held that where assessee had made claim of expenditure in relation to labour payments which was disallowed by applying section 40(a)(ia), under these circumstances, it would not amount to furnishing of inaccurate particulars of income so as to attract penalty u/s 271(1)(c). No contrary judgment has been brought to our notice by the Ld. DR. Thus, keeping in view facts of this case and well settled position of law,. we find that Ld. Counsel has been able to successfully show that in this case penalty was not leviable. Thus, penalty levied is deleted.
5 Dhananjay M. Pandey
In the result, this appeal filed by the assessee is allowed.
Order pronounced in the open court on 29th June, 2016. (Joginder Singh) (Ashwani Taneja) "या"यक सद"य / JUDICIAL MEMBER लेखा सद"य / ACCOUNTANT MEMBER मुंबई Mumbai; "दनांक Dated: 29 /06 /2016 ctàxÄ? P.S/."न.स.